The Government of Fiji owes its own registrar of Government debt over $600 million.
According to the Government’s annual debt report for 2022-2023, the Reserve Bank of Fiji (RBF) held a total of $694.3 million in Government bonds at the end of July 2023. This marks a significant increase from the $59.4 million it held in July 2019.
Economists attribute this rise to a process known as quantitative easing, where the central bank injects new money into the economy.
“That has happened, particularly during the COVID years,” stated former Reserve Bank of Fiji governor Savenaca Narube. “Due to the impact of COVID-19 on other institutions that purchase these bonds from the Government, RBF intervened and bought the bonds. It’s part of quantitative easing; the Reserve Bank pumps new money into the economy by doing this. I suggested that measure during COVID, advocating for more money to be introduced into the system.”
In 2020, during the peak of the pandemic, Mr. Narube proposed that RBF print $500 million in new money to lend to the Government, which should then distribute it to micro, small, and medium enterprises, low-income earners, and families that had lost their jobs. This proposal was dismissed by the then Minister of Finance, Aiyaz Sayed-Khaiyum, who argued that such a move would lead to significant inflation.
Despite this, by July 2020, the debt report indicated that RBF had increased its bond holdings to $360.1 million from $59.4 million in 2019. By July 2022, this figure had risen further to $694.8 million.
Mr. Narube noted that this increase demonstrates that new money was being pumped into the financial system by the RBF, the only institution in the country capable of such an action. He emphasized that while this measure was necessary during the COVID crisis, it should not continue during normal times as financial markets have stabilized.
“I agreed to that during COVID but now, in normal times, that should ease off and the marketplace should take over the funding of Government. So I expect that to decline over time,” Mr. Narube remarked.
RBF serves as the Government of Fiji’s registrar of debt, issuing debt instruments on behalf of the Fiji Government, Mr. Narube added.